The Shrinking Of Big Law, Ctd

Big Law boosters point to the fact that revenue at the country’s 100 biggest firms grew by 3.4 percent last year—a reasonable increase, if hardly the 8-12 percent increases of the early-to-mid-2000s. But when you unpack the number a bit, it looks even less impressive. It turns out that the bump was driven primarily by a huge fourth quarter after three middling ones. And that big fourth quarter was, in turn, the result of some idiosyncratic factors—like a rush by corporations to complete transactions before the dreaded fiscal cliff took effect on January 1, and law firms aggressively seeking payment before the end of the year (for similar reasons).

Meanwhile, other data show the problems for the legal profession continuing. Of the law students who graduated in 2008, 75 percent of found a legal job within nine months, according to the National Association for Law Placement (NALP). For those who graduated in 2012, the number had fallen to 64 percent, a record low. Of course, Big Law firms typically hire associates well in advance, so these numbers partly reflect the hiring environment that existed a year or more earlier. And, in fairness, NALP reports that hiring at big firms did recover a bit for the class of 2012 after a terrible 2011, even if it was still well below the 2009 level. Still, the fact that the market for lawyers was historically weak more than three years after the recession is pretty alarming. NALP refers ominously to a “new normal” in law-firm hiring.

Update from a reader:

Here’s the main problem with Scheiber’s thesis: Where the heck is all the business going to go when 90% of big law firms collapse?

I’ve been a big law associate for a number of years, and I think I would have noticed if 9 out of 10 of my colleagues had been wandering the halls with nothing to do. So, when the firm-pocalypse comes and wipes out 180 big firms, how are the remaining 20 (which will likely be the busiest 20) absorb all of the abandoned legal work without massive expansion? Even if they could expand like that, with only 20 law firms, how could you ever find one that wasn’t already representing your adversary or negotiating counter-party?

And it’s not like thousands of little firms will spring up to replace all the fallen giants. Small-firms are just not capable or cost efficient enough at handling the kinds of matters that the big boys do. You can’t run a giant, months-long document review out of a five-person law firm unless you aren’t doing anything else, and if you aren’t doing anything else, how does your firm survive when the case suddenly settles and you haven’t booked anything else because your whole firm was working on that one case which could have lasted months?